How to Cancel a Credit Card (and When You Should)

For the most part, you rarely need to cancel your credit card. But let's say that for one reason or another, you've decided to whittle down what's in your wallet and simplify your card-carrying life. Canceling a credit card might seem like a straightforward process, but it's essential to approach it thoughtfully.

Before you make the decision to close an account, consider the potential impacts and follow these steps to ensure you're canceling your credit card in the smartest and safest way possible.

The consequences of canceling your credit card

Before you cancel your credit card, it's crucial to understand the potential effects. Closing a credit card can affect your credit utilization ratio and the average age of your credit accounts, potentially lowering your credit score. You may lose rewards points, cash back, or other perks associated with the card. Additionally, a credit card can serve as a financial safety net in emergencies, so consider whether you're comfortable losing that backup option.

If you're thinking about canceling due to high fees or lack of use, consider some alternatives before taking the final step. You might be able to downgrade to a no-fee card within the same issuer's lineup. Alternatively, try negotiating better terms with your card issuer—they may be willing to waive fees or offer better rewards to keep you as a customer. If these options don't work, you could keep the card but use it sparingly to maintain the account and its positive impact on your credit history.

When should you close (or not close) a credit card?

Before proceeding with cancellation, think about these three important questions:

Does it charge an annual fee? If you're paying a fee for benefits you don't use (like premium rewards-earning ability, insurance coverage, or free travel upgrades), there's probably not a good reason to keep that credit card in your rotation. Consider whether the card's benefits outweigh its costs.
Does it have a high credit limit? You don't want to tank your credit score by closing a card that would dramatically reduce your overall credit limit. Doing so messes with the credit utilization part of your credit score. If you close a credit card but have balances on other cards, you're likely to see your score dip by as much as 50 points. A high credit limit isn't a reason not to close your card, but you need to be strategic about it.
Is it your oldest credit card? That card you've had forever boosts your credit score by increasing the overall age of your credit history. If you close it, you'll probably see your score drop—but probably not by more than 20 points. Consider keeping your oldest card active if possible, especially if it doesn't have an annual fee.

Steps to cancel your credit card

If you've weighed your options and still want to proceed with cancellation, follow these steps to do it the smart way:

Pay off your balance: Ensure your card has a zero balance before canceling. If you want to get rid of your card ASAP but can't pay the whole balance at once, consider transferring the balance to a card that has a 0% balance transfer offer.
Redeem your rewards: Use or transfer any remaining rewards points or cash back. If you have several cards that use the same rewards redemption portal (like multiple Chase cards or Capital One cards), you may be able to skip this step. But keep in mind that you'll probably only be able to redeem your points under the restrictions of your remaining cards. Double-check the rules of your card issuer before closing your card.
Cancel automatic payments: Update any recurring charges linked to the card to ensure you don't miss any important payments.
Contact the issuer: Call the number on the back of your card to initiate the cancellation process. We know this step can be uncomfortable, but it's usually necessary. You might be able to close your card online via live chat, but the odds are good that you'll have to speak to a human representative. Confirm with the agent that your balance is zero. If you have a high credit limit and don't want to knock your credit utilization rate out of whack, ask if you can transfer your limit to another card with the same issuer.
Request written confirmation: Ask for a written statement confirming the account closure and zero balance. Your card issuer should send you a letter confirming your account has been closed and has a zero balance. If you don't get one within a week or two, you can either call your card issuer or send a letter asking them to confirm your cancellation request.
Follow up: Check your credit report after a few weeks to ensure the account is reported as "closed by consumer." It can take up to 45 days for your card closure to get reported to the credit bureaus, which means it could take almost two months for you to see any changes to your score.
Dispose of the card: Cut up the physical card, ensuring you destroy the chip and magnetic strip. If your card is metal, don't cut it up! Contact your issuer for proper disposal instructions.

Additional safety measures

To protect yourself further, keep records of your cancellation request and confirmation. Store your cancellation confirmation on file for a few years, just in case you need to reference it. Continue to monitor your credit report for any unexpected activity. Be prepared for a potential counter-offer from the card issuer and decide in advance if you're willing to negotiate.

By following these steps, you can cancel your credit card in a way that minimizes negative impacts on your financial health and protects your personal information. Remember, canceling a credit card is a significant financial decision, so take the time to consider all your options before proceeding. Closing credit cards isn't something you should plan to do on a regular basis, but if your situation warrants a closure, you can repeat these steps as needed.

After weighing the potential impacts, you might decide that 'downgrading to a no-fee card' within the same issuer's lineup could be a more suitable option than canceling your credit card entirely, saving you money in the process. When discussing the cancellation with your card issuer, don't forget to 'ask if you can transfer your credit limit' to another card with the same issuer, preventing a significant decrease in your credit utilization ratio.